Cloudflare, Inc.

Previous wording

◦International reach. Our global network, with a presence in more than 335 cities and over 125 countries worldwide, has helped to foster our strong international growth. International markets represented 49% and 51% of our revenue in the three months ended June 30, 2026 and 2025, respectively, and we intend to continue to invest in our international growth as a strategy to expand our customer base around the world.

Current wording

◦International reach. Our global network, with a presence in more than 340 cities and over 130 countries worldwide, has helped to foster our strong international growth. International markets represented 48% and 50% of our revenue in the three months ended September 30, 2026 and 2025, respectively, and we intend to continue to invest in our international growth as a strategy to expand our customer base around the world.

Previous wording

We are closely monitoring macroeconomic developments and global events, such as the tariffs described above, conflicts and geopolitical tension around the world, and other geopolitical events such as elections and other governmental changes, and, in each case, how they may adversely impact our and our customers’ businesses. Weak economic conditions or uncertainty regarding the stability of financial markets related to stock market volatility, inflation, recession, threats of tariffs and other impediments to cross-border trade, trade agreements or governmental fiscal, monetary and tax policies, among others, also could adversely impact our and our customers’ business, financial condition and operating results. In addition, general tightening in the credit market, lower levels of liquidity, increases in rates of default and bankruptcy, and significant volatility in equity and fixed-income markets could all negatively impact our customers’ purchasing decisions. Potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycle for certain types of customers and sales (including sales to new customers and expansion sales to existing customers), slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth from prior periods (including with respect to new customers). We believe macroeconomic uncertainty could persist through 2026. As a result, we expect that some or all of the negative trends described in this paragraph may emerge or recur during future quarters.

Current wording

We are closely monitoring macroeconomic developments and global events, such as the tariffs described above, conflicts and geopolitical tension around the world, and other geopolitical events such as elections, including the recent U.S. midterm elections, and other governmental changes, and, in each case, how they may adversely impact our and our customers’ businesses. Weak economic conditions or uncertainty regarding the stability of financial markets related to stock market volatility, inflation, recession, threats of tariffs and other impediments to cross-border trade, trade agreements or governmental fiscal, monetary and tax policies, among others, also could adversely impact our and our customers’ business, financial condition and operating results. In addition, general tightening in the credit market, lower levels of liquidity, increases in rates of default and bankruptcy, and significant volatility in equity and fixed-income markets could all negatively impact our customers’ purchasing decisions. Potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycle for certain types of customers and sales (including sales to new customers and expansion sales to existing customers), slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth from prior periods (including with respect to new customers). We believe macroeconomic uncertainty could persist through 2026. As a result, we expect that some or all of the negative trends described in this paragraph may emerge or recur during future quarters.

Previous wording

On May 7, 2026, we announced a plan (the Plan) designed to further accelerate our evolution to an agentic AI-first operating model. The Plan reduced approximately 20% of our workforce. We estimate total restructuring charges under the Plan to be up to $165 million, consisting of $125 million in cash expenditures for severance and employee benefits, $35 million in stock-based compensation and $5 million in other costs. We recognized the majority of the restructuring charges during the three months ended June 30, 2026 and expect to recognize the remaining charges in the three months ended September 30, 2026 as we substantially complete the Plan by September 30, 2026. These charges were included in restructuring and other costs on our condensed consolidated statement of operations for the three and six months ended June 30, 2026. As of June 30, 2026, the liability associated with the Plan was mostly included in accrued compensation on our condensed consolidated balance sheet. For further details regarding restructuring and other charges, refer to Note 15 to the condensed consolidated financial statements in Part I, Item 1, and Item 1A “Risk Factors” in Part II of this Quarterly Report on Form 10-Q.

Current wording

On May 7, 2026, we announced a plan (the Plan) designed to further accelerate our evolution to an agentic AI-first operating model. The Plan reduced approximately 20% of our workforce. We estimate total restructuring charges under the Plan to be up to $165 million, consisting of $125 million in cash expenditures for severance and employee benefits, $35 million in stock-based compensation and $5 million in other costs. These charges were included in restructuring and other charges on our condensed consolidated statement of operations for the three and nine months ended September 30, 2026. As of September 30, 2026, the liability associated with the Plan was mostly included in accrued compensation on our condensed consolidated balance sheet. The Plan was substantially completed as of September 30, 2026. For further details regarding restructuring and other charges, refer to Note 15 to the condensed consolidated financial statements in Part I, Item 1, and Item 1A “Risk Factors” in Part II of this Quarterly Report on Form 10-Q.

Previous wording

We define non-GAAP income from operations and non-GAAP operating margin as U.S. GAAP loss from operations and U.S. GAAP operating margin, respectively, excluding stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses, lease impairment charges, legal reserve and settlements, and restructuring and other charges. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. We exclude employer payroll tax expenses related to stock-based compensation, which is a cash expense, from certain of our non-GAAP financial measures, because such expenses are dependent upon the price of our Class A common stock and other factors that are beyond our control and do not correlate to the operation of our business. We exclude amortization of acquired intangible assets, which is a non-cash expense, related to business combinations from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. We exclude acquisition-related and other expenses from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. Acquisition-related and other expenses can be cash or non-cash expenses, and include third-party transaction costs and compensation expense for key acquired personnel. We exclude lease impairment charges related to real estate leases, which is a non-cash expense, from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance. We exclude legal reserve and settlements, which can be cash or non-cash expenses, from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance. We exclude restructuring and other charges, which can be cash or non-cash expenses, from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance.

Current wording

We define non-GAAP income from operations and non-GAAP operating margin as U.S. GAAP loss from operations and U.S. GAAP operating margin, respectively, excluding stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses, lease impairment charges, legal reserve and settlements, and restructuring and other charges. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. We exclude employer payroll tax expenses related to stock-based compensation, which is a cash expense, from certain of our non-GAAP financial measures, because such expenses are dependent upon the price of our Class A common stock and other factors that are beyond our control and do not correlate to the operation of our business. We exclude amortization of acquired intangible assets, which is a non-cash expense, related to business combinations from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. We exclude acquisition-related and other expenses from certain of our non-GAAP financial measures because such expenses are related to business combinations and have no direct correlation to the operation of our business. Acquisition-related and other expenses can be cash or non-cash expenses, and include third-party transaction costs and compensation expense for key acquired personnel. We exclude lease impairment charges related to real estate leases, which is a non-cash expense, from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance. We exclude legal reserve, settlements, and related professional fees associated with litigation matters that are outside the ordinary course of our business. These items, which can be cash or non-cash expenses, are excluded from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance. We exclude restructuring and other charges, which can be cash or non-cash expenses, from certain of our non-GAAP financial measures because they are not indicative of our ongoing cost structure and core business performance.

Previous wording

The number of paying customers with Annualized Revenue greater than $100,000 was 4,698 and 3,712 for the three months ended June 30, 2026 and June 30, 2025, respectively.

Current wording

The number of paying customers with Annualized Revenue greater than $100,000 was 5,006 and 4,009 for the three months ended September 30, 2026 and September 30, 2025, respectively.

Previous wording

Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention rate measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention rate for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention rate includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period. Our dollar-based net retention rate excludes professional services and the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. We believe this provides a more meaningful representation of our ability to add incremental business from existing paying customers as they renew and expand their contracts. Our dollar-based net retention rates were 120% and 114% for the three months ended June 30, 2026 and June 30, 2025, respectively.

Current wording

Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention rate measures our ability to retain and expand recurring revenue from existing customers. To calculate dollar-based net retention rate for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention rate includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period. Our dollar-based net retention rate excludes professional services and the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. We believe this provides a more meaningful representation of our ability to add incremental business from existing paying customers as they renew and expand their contracts. Our dollar-based net retention rates were 122% and 119% for the three months ended September 30, 2026 and September 30, 2025, respectively.

Previous wording

Interest expense consists primarily of amortization of the debt issuance costs on our 0% Convertible Senior Notes due 2026 (the 2026 Notes) and our 0% Convertible Senior Notes due 2030 (the 2030 Notes, and together with the 2026 Notes, the Notes).

Current wording

Interest expense consists primarily of amortization of the debt issuance costs on our 0% Convertible Senior Notes due 2031 (the 2031 Notes), 0% Convertible Senior Notes due 2030 (the 2030 Notes, and together with the 2031 Notes, the Notes), and 0% Convertible Senior Notes due 2026 (the 2026 Notes).

Previous wording

Comparison of Three and Six Months Ended June 30, 2026 and 2025

Current wording

Comparison of Three and Nine Months Ended September 30, 2026 and 2025

Previous wording

Revenue increased by $183.7 million and $344.4 million, or 36% and 35%, for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. The increase in revenue was primarily due to the addition of new paying customers, including growth in paying customers with greater than $100,000 in annualized revenue, which increased to 4,698 as of June 30, 2026 from 3,712 as of June 30, 2025, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 120% for the three months ended June 30, 2026.

Current wording

Revenue increased by $220.5 million and $564.9 million, or 39% and 36%, for the three and nine months ended September 30, 2026, compared to the three and nine months ended September 30, 2025. The increase in revenue was primarily due to the addition of new paying customers, including growth in paying customers with greater than $100,000 in annualized revenue, which increased to 5,006 as of September 30, 2026 from 4,009 as of September 30, 2025, as well as the expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 122% for the three months ended September 30, 2026.

Previous wording

Cost of revenue increased by $67.9 million, or 53%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase in the cost of revenue was primarily due to an increase of $30.1 million in third-party technology services costs, an increase of $20.9 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth and an increase of $10.1 million in depreciation expense due to an increase in server acquisitions and deployments.

Current wording

Cost of revenue increased by $79.0 million, or 54%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase in the cost of revenue was primarily due to an increase of $43.0 million in third-party technology services costs, an increase of $19.4 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth, and an increase of $10.1 million in depreciation expense due to an increase in server acquisitions and deployments.

Previous wording

Cost of revenue increased by $136.4 million, or 56%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase in the cost of revenue was primarily due to an increase of $61.0 million in third-party technology services costs, an increase of $36.5 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth, an increase of $21.7 million in depreciation expense due to an increase in server acquisitions and deployments and an increase of $10.8 million in employee-related costs.

Current wording

Cost of revenue increased by $215.4 million, or 55%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase in the cost of revenue was primarily due to an increase of $104.0 million in third-party technology services costs, an increase of $55.9 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth, an increase of $31.8 million in depreciation expense due to an increase in server acquisitions and deployments, an increase of $12.8 million in employee-related costs, and an increase of $5.1 million in amortization expense of capitalized internal-use software.

Previous wording

Gross margin decreased to 72% from 75%, for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. The decrease in gross margin was primarily due to the increases in costs mentioned above.

Current wording

Gross margin decreased to 71% from 74%, and 71% from 75%, respectively, for the three and nine months ended September 30, 2026, compared to the three and nine months ended September 30, 2025. The decrease in gross margin was primarily due to the increases in costs mentioned above.

Previous wording

Sales and marketing expenses increased by $56.8 million, or 26%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was primarily driven by $40.6 million in increased employee-related costs due to a 4% increase in headcount in our sales and marketing organization, including an increase of $3.4 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $7.5 million in expenses for marketing programs, investments in brand awareness advertising, third-party industry events, and digital performance marketing, an increase of $6.9 million in subscription expenses and an increase of $6.7 million in depreciation expense. These increases were partially offset by a $9.4 million decrease in co-location and bandwidth expenses for free customers.

Current wording

Sales and marketing expenses increased by $101.7 million, or 43%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was primarily driven by $54.4 million in increased employee-related costs due to a 2% increase in headcount in our sales and marketing organization, including an increase of $27.2 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $18.1 million in revenue share, an increase of $9.7 million in expenses for marketing programs, investments in brand awareness advertising, third-party industry events, and digital performance marketing, an increase of $9.5 million in subscription expenses, an increase of $7.7 million in depreciation expense, and an increase of $5.4 million in amortization expense of capitalized internal-use software. These increases were partially offset by a $9.9 million decrease in co-location and bandwidth expenses for free customers.

Previous wording

Sales and marketing expenses increased by $114.4 million, or 26%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was primarily driven by $92.1 million in increased employee-related costs due to a 4% increase in headcount in our sales and marketing organization, including an increase of $14.3 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $14.7 million in expenses for marketing programs, investments in brand awareness advertising, third-party industry events, and digital performance marketing, an increase of $13.0 million in depreciation expense and an increase of $10.4 million in subscription expenses. These increases were partially offset by a $19.8 million decrease in co-location and bandwidth expenses for free customers.

Current wording

Sales and marketing expenses increased by $216.0 million, or 32%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was primarily driven by $146.5 million in increased employee-related costs due to a 2% increase in headcount in our sales and marketing organization, including an increase of $41.5 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $24.4 million in expenses for marketing programs, investments in brand awareness advertising, third-party industry events, and digital performance marketing, an increase of $20.7 million in depreciation expense, an increase of $20.0 million in subscription expenses, an increase of $19.3 million in revenue share, and an increase of $10.6 million in amortization expense of capitalized internal-use software. These increases were partially offset by a $29.7 million decrease in co-location and bandwidth expenses for free customers.

Previous wording

Research and development expenses increased by $60.8 million, or 24%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was primarily driven by $55.0 million in increased employee-related costs due to a 5% increase in headcount in our research and development organization, including an increase of $16.9 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $13.7 million of subscription expenses, partially offset by increased capitalized internal-use software development costs of $6.4 million.

Current wording

Research and development expenses increased by $47.2 million, or 39%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was primarily driven by $37.9 million in increased employee-related costs, including an increase of $25.7 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $12.5 million in subscription expenses, partially offset by increased capitalized internal-use software development costs of $4.5 million.

Previous wording

Research and development expenses increased by $24.9 million, or 19%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was primarily driven by $19.6 million in increased employee-related costs due to a 5% increase in headcount in our research and development organization, including an increase of $5.9 million in stock-based compensation expense, partially offset by increased capitalized internal-use software development costs of $4.5 million.

Current wording

Research and development expenses increased by $108.1 million, or 29%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was primarily driven by $92.9 million in increased employee-related costs, including an increase of $42.5 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $26.2 million in subscription expenses, partially offset by increased capitalized internal-use software development costs of $10.9 million.

Previous wording

General and administrative expenses increased by $21.9 million, or 23%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The increase was primarily due to an increase of $14.5 million in professional fees for third-party accounting, consulting, and legal services and an increase of $4.5 million in amortization expense of capitalized internal-use software. These increases were partially offset by a $3.8 million decrease in lease impairment charges.

Current wording

General and administrative expenses increased by $12.0 million, or 13%, for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The increase was primarily due to an increase of $10.7 million in professional fees for third-party accounting, consulting, and legal services. The remainder of the increase was primarily due to an increase of $3.0 million in business licenses and taxes, partially offset by an $8.9 million decrease in employee-related costs due to a 14% decrease in headcount in our general and administrative organization.

Previous wording

General and administrative expenses increased by $29.3 million, or 16%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The increase was primarily due to an increase of $18.7 million in professional fees for third-party accounting, consulting, and legal services, an increase of $4.4 million in amortization expense of capitalized internal-use software and an increase of $2.4 million in acquisitions-related costs. These increases were partially offset by a $5.9 million decrease in employee-related costs due to a 13% decrease in headcount in our general and administrative organization.

Current wording

General and administrative expenses increased by $41.3 million, or 15%, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase was primarily due to an increase of $34.1 million in professional fees for third-party accounting, consulting, and legal services, an increase of $4.9 million in amortization expense of capitalized internal-use software, an increase of $3.8 million in business licenses and taxes, an increase of $2.5 million in acquisitions-related costs, and an increase of $1.0 million in travel-related expenses. These increases were partially offset by a $14.9 million decrease in employee-related costs due to a 14% decrease in headcount in our general and administrative organization.

Previous wording

Restructuring and other charges increased by $150.7 million, or 100% during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. The increase is due to the Plan.

Current wording

Restructuring and other charges increased by $11.0 million and $161.7 million, or 100%, respectively, during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025. The increase is due to the Plan. Refer to Note 15 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Interest income increased by $14.5 million and $33.3 million, or 57% and 71%, respectively, during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. The increase in interest income was primarily driven by larger investment balance and shorter turnover of investment portfolio during the current fiscal year.

Current wording

Interest income increased by $36.1 million, or 40%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase in interest income was primarily driven by larger investment balance during the current fiscal year.

Previous wording

Interest expense did not significantly fluctuate during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025.

Current wording

Interest expense did not significantly fluctuate during the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025.

Previous wording

Other income (expense), net increased by $11.3 million, or 153%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The increase was primarily driven by larger unrealized gains due to changes in foreign currency exchange rates relative to the U.S. dollar compared to prior periods.

Current wording

Other income (expense), net increased by $10.4 million, or 135%, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase was primarily driven by larger unrealized gains due to changes in foreign currency exchange rates relative to the U.S. dollar compared to prior periods.

Previous wording

The net change in income taxes for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 is $1.1 million. The income tax expense of $2.0 million for the three months ended June 30, 2026 was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes, offset by the partial release of the U.S. valuation allowance in connection with acquisitions. The income tax expense of $3.2 million for the three months ended June 30, 2025 was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes.

Current wording

The net change in income taxes for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 is $3.6 million. The income tax expense of $6.8 million for the three months ended September 30, 2026 was primarily related to income tax expense from profitable foreign jurisdictions. The income tax expense of $3.1 million for the three months ended September 30, 2025 was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes.

Previous wording

The net change in income taxes for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 is $1.3 million. The income tax expense of $3.6 million for the six months ended June 30, 2026 was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes, offset by the partial release of the U.S. and U.K. valuation allowances in connection with acquisitions. The income tax expense of $4.9 million for the six months ended June 30, 2025 was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes.

Current wording

The net change in income taxes for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 is $2.3 million. The income tax expense of $10.3 million for the nine months ended September 30, 2026 was primarily related to income tax expense from profitable foreign jurisdictions, offset by the partial release of the U.S. and U.K. valuation allowances in connection with acquisitions. The income tax expense of $8.0 million for the nine months ended September 30, 2025 was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes.

Previous wording

Since our inception, we have financed our operations primarily through net proceeds from the sale of our equity and debt securities, as well as cash flow from our operating activities, and we expect to continue to finance our operations using the same sources for the foreseeable future. In August 2021, we issued $1,293.8 million aggregate principal amount of the 2026 Notes, from which we received net proceeds of $1,274.0 million. In May 2024, we entered into a credit agreement with a syndicated group of lenders, which provides for a senior secured $400.0 million revolving credit facility (the Revolving Credit Facility), with a sublimit of $30.0 million available for the issuance of letters of credit and $30.0 million available for swingline borrowings. The credit agreement permits us to increase the commitments under the Revolving Credit Facility by an aggregate principal amount of up to $150.0 million, subject to the satisfaction of certain conditions. The proceeds of the loans under the Revolving Credit Facility may be used for working capital and general corporate purposes. As of June 30, 2026, no loans were outstanding under the Revolving Credit Facility. Letters of credit issued under the credit agreement were not material as of June 30, 2026. In March 2025, we settled the capped call option transactions (the 2025 Capped Calls) associated with the 0.75% Convertible Senior Notes due 2025 and received $309.6 million in cash. In June 2025, we issued $2,000.0 million aggregate principal amount of the 2030 Notes, from which we received net proceeds of$1,971.0 million. In connection with the offering of the 2030 Notes, we entered into additional privately-negotiated capped call option transactions with certain financial institution counterparties (the 2030 Capped Calls). On May 15, 2026, the Company provided irrevocable notice to the holders of the 2026 Notes of its election to settle all conversion obligations with respect to any 2026 Notes that are converted on or after May 15, 2026 by paying the aggregate principal amount of the 2026 Notes converted in cash and issuing shares of the Company's Class A common stock for the remainder of the conversion value in excess of such principal amount in respect of the August 15, 2026 maturity date. If any such excess would result in the issuance of fractional shares, the Company will pay cash in lieu of such fractional shares. Additionally, the Company provided irrevocable notice to certain financial institution counterparties of its election that the counterparties are to settle the 2026 Capped Calls by Net Share Settlement, as defined in the 2026 Capped Calls. Concurrently with its issuance of shares to the holders of the 2026 Notes to settle the amount owed above the principal amount on August 15, 2026, the Company expects to receive shares under the 2026 Capped Calls to offset, in whole or in part, the shares issued.

Current wording

Since our inception, we have financed our operations primarily through net proceeds from the sale of our equity and debt securities, as well as cash flow from our operating activities, and we expect to continue to finance our operations using the same sources for the foreseeable future.

Previous wording

As of June 30, 2026, we had cash and cash equivalents of $1,663.8 million, including $40.1 million held by our foreign subsidiaries. Our cash and cash equivalents consist of cash, highly liquid money market funds, U.S. treasury bills, and commercial paper. We also had available-for-sale securities of $2,499.0 million consisting of corporate bonds, U.S. treasury securities, and U.S. government agency securities. As of June 30, 2026, our investment portfolio consisted of investment grade securities with an average credit rating of AA-. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1,397.8 million as of June 30, 2026. We expect to continue to incur operating losses and cash flow that may fluctuate between positive and negative for the foreseeable future due to the investments we intend to make in our business, and as a result we may require additional capital resources to execute on our strategic initiatives to grow our business.

Current wording

As of September 30, 2026, we had cash and cash equivalents of $1,969.5 million, including $45.7 million held by our foreign subsidiaries. Our cash and cash equivalents consist of cash, highly liquid money market funds, time deposits, and commercial paper. We also had available-for-sale securities of $3,159.2 million consisting of corporate bonds, U.S. treasury securities, U.S. government agency securities, and commercial paper. As of September 30, 2026, our investment portfolio consisted of investment grade securities with an average credit rating of AA-. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1,431.9 million as of September 30, 2026. We expect to continue to incur operating losses and cash flow that may fluctuate between positive and negative for the foreseeable future due to the investments we intend to make in our business, and as a result we may require additional capital resources to execute on our strategic initiatives to grow our business.

Previous wording

Net cash provided by operating activities during the six months ended June 30, 2026 was $275.9 million, which resulted from a net loss of $192.9 million, adjusted for non-cash charges of $485.4 million and net cash outflow of $16.6 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $274.1 million for stock-based compensation expense, $123.2 million for depreciation and amortization expense, $63.5 million for amortization of deferred contract acquisition costs, $41.7 million for non-cash operating lease costs, and $5.2 million for provision of bad debt, which were partially offset by $13.2 million for net accretion of discounts, and $7.0 million for deferred income taxes. The net cash outflows from changes in operating assets and liabilities were primarily the result of an $84.5 million increase in deferred contract acquisition costs due to the addition of new customers, a $60.6 million increase in prepaid expenses and other current assets, a $45.6 million increase in accounts receivable, net, which increased due to our growing customer base and timing of collections from our customers, an increase of $45.6 million in payments related to operating lease liabilities, and a $3.7 million increase in contract assets, which were partially offset by a $127.1 million increase in deferred revenue, a $48.7 million increase in accrued expenses and other current liabilities, a $40.5 million increase in accrued compensation, and a $7.1 million decrease in other noncurrent assets related to operating activities.

Current wording

Net cash provided by operating activities during the nine months ended September 30, 2026 was $491.3 million, which resulted from a net loss of $227.0 million, adjusted for non-cash charges of $780.6 million and net cash outflow of $62.4 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $441.7 million for stock-based compensation expense, $190.5 million for depreciation and amortization expense, $97.8 million for amortization of deferred contract acquisition costs, $64.1 million for non-cash operating lease costs, $8.3 million for provision of bad debt and $7.8 million for amortization of debt issuance cost, which were partially offset by $16.5 million for net accretion of discounts, and $7.0 million for deferred income taxes. The net cash outflows from changes in operating assets and liabilities were primarily the result of a $144.9 million increase in deferred contract acquisition costs due to the addition of new customers, a $112.8 million increase in prepaid expenses and other current assets, a $104.1 million increase in accounts receivable, net, which increased due to our growing customer base and timing of collections from our customers, an increase of $67.1 million in payments related to operating lease liabilities, an increase of $9.6 million in other noncurrent assets related to operating activities, and a $6.7 million increase in contract assets, which were partially offset by a $190.9 million increase in deferred revenue, a $106.9 million increase in accrued expenses and other current liabilities, a $60.6 million increase in accounts payable, and a $23.0 million increase in accrued compensation.

Previous wording

Net cash provided by operating activities during the six months ended June 30, 2025 was $245.6 million, which resulted from a net loss of $88.9 million, adjusted for non-cash charges of $383.5 million and net cash outflow of $49.1 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $217.9 million for stock-based compensation expense, $87.7 million for depreciation and amortization expense, $47.3 million for amortization of deferred contract acquisition costs, $29.9 million for non-cash operating lease costs, and $7.8 million for provision of bad debt, which were partially offset by $12.0 million for net accretion of discounts. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $59.0 million increase in deferred contract acquisition costs due to increased headcount of commission eligible employees, a $46.3 million increase in prepaid expenses and other current assets, $25.0 million in payments related to operating lease liabilities, a $4.7 million increase in contract assets, and a $2.9 million decrease in accrued compensation, which were partially offset by a $82.6 million increase in deferred revenue and a $4.3 million decrease in other noncurrent assets related to operating activities.

Current wording

Net cash provided by operating activities during the nine months ended September 30, 2025 was $412.7 million, which resulted from a net loss of $90.2 million, adjusted for non-cash charges of $584.3 million and net cash outflow of $81.4 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $327.8 million for stock-based compensation expense, $137.2 million for depreciation and amortization expense, $73.7 million for amortization of deferred contract acquisition costs, $47.2 million for non-cash operating lease costs, $12.8 million for provision of bad debt, and $4.6 million for amortization of debt issuance costs, which were partially offset by $21.5 million for net accretion of discounts. The net cash outflow from changes in operating assets and liabilities were primarily the result of a $95.5 million increase in deferred contract acquisition costs due to the addition of new customers, a $62.3 million increase in prepaid expenses and other current assets, a $47.9 million increase in accounts receivable, net related to operating activities, which increased due to our growing customer base and timing of collections from our customers, an increase of $41.9 million in payments related to operating lease liabilities, a $6.1 million increase in contract assets, and a $4.3 million decrease in accounts payable, which were partially offset by a $145.0 million increase in deferred revenue, a $17.6 million increase in accrued expenses and other current liabilities, a $9.3 million increase in accrued compensation, and a $4.4 million decrease in other noncurrent assets related to operating activities.

Previous wording

Net cash provided by investing activities during the six months ended June 30, 2026 of $449.4 million resulted primarily from the maturities of available-for-sale securities of $1,442.2 million, which were partially offset by the purchases of available-for-sale securities of $783.9 million, capital expenditures of $115.2 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $75.1 million, and capitalization of internal-use software development costs of $20.2 million.

Current wording

Net cash used in investing activities during the nine months ended September 30, 2026 of $357.2 million resulted primarily from the purchases of available-for-sale securities of $2,111.7 million, capital expenditures of $237.0 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $74.3 million, and capitalization of internal-use software development costs of $31.7 million, which were partially offset by the maturities of available-for-sale securities of $2,093.5 million.

Previous wording

Net cash used in investing activities during the six months ended June 30, 2025 of $885.5 million resulted primarily from the purchases of available-for-sale securities of $1,530.8 million, capital expenditures of $145.8 million, capitalization of internal-use software development costs of $13.6 million, and cash paid for asset acquisitions and business combinations, net of cash acquired of $6.5 million, which were partially offset by the maturities of available-for-sale securities of $810.8 million.

Current wording

Net cash used in investing activities during the nine months ended September 30, 2025 of $1,515.0 million resulted primarily from the purchases of available-for-sale securities of $2,586.6 million, capital expenditures of $230.4 million, capitalization of internal-use software development costs of $21.2 million, and cash paid for asset acquisitions and business combinations, net of cash acquired of $6.5 million, which were partially offset by the maturities of available-for-sale securities of $1,329.0 million.

Previous wording

Net cash used in financing activities of $3.7 million during the six months ended June 30, 2026 was primarily due to $29.5 million of payments of tax withholding on restricted stock units (RSUs) and performance stock units, which were partially offset by $16.1 million proceeds from the issuance of Class A common stock pursuant to the 2019 Employee Stock Purchase Plan (the ESPP) and $9.8 million of proceeds from the exercise of vested stock options.

Current wording

Net cash provided by financing activities of $893.2 million during the nine months ended September 30, 2026 was primarily due to $2,500.0 million gross proceeds from issuance of the 2031 Notes, $16.1 million proceeds from the issuance of Class A common stock pursuant to the 2019 Employee Stock Purchase Plan (the ESPP) and $15.8 million of proceeds from the exercise of vested stock options, which were partially offset by $1,293.8 million repayment of the 2026 Notes, $259.5 million from the purchases of the 2031 Capped Calls, $48.6 million of payments of tax withholding on restricted stock unit (RSU) settlements, and $36.6 million cash paid for issuance costs related to the 2031 Notes.

Previous wording

Net cash provided by financing activities of $2,011.1 million during the six months ended June 30, 2025 was primarily due to $2,000.0 million gross proceeds from the issuance of the 2030 Notes, $309.6 million proceeds from the settlement of the 2025 Capped Calls, $17.9 million of proceeds from the exercise of vested stock options, and $13.1 million proceeds from the issuance of Class A common stock pursuant to the ESPP, which were partially offset by $283.4 million from the purchases of the 2030 Capped Calls, $27.9 million cash paid for issuance costs related to the 2030 Notes, and $18.2 million of payments of tax withholding on RSU settlements.

Current wording

Net cash provided by financing activities of $2,007.6 million during the nine months ended September 30, 2025 was primarily due to $2,000.0 million gross proceeds from the issuance of the 2030 Notes, $309.6 million proceeds from the settlement of the 2025 Capped Calls, $29.5 million of proceeds from the exercise of vested stock options, and $13.1 million proceeds from the issuance of Class A common stock pursuant to the ESPP, which were partially offset by $283.4 million from the purchases of the 2030 Capped Calls, $32.2 million of payments of tax withholding on RSU settlements, and $29.0 million cash paid for issuance costs related to the 2030 Notes.

Previous wording

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Such estimates include, but are not limited to, allowance for doubtful accounts, deferred contract acquisitions costs, the period of benefit generated from the deferred contract acquisition costs, the capitalization and estimated useful life of internal-use software, valuation of acquired intangible assets, the assessment of recoverability of intangible assets and their estimated useful lives, useful lives of property and equipment, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation and recognition of stock-based compensation awards, the assessment of uncertain tax positions, and the recognition and measurement of current and deferred income tax assets and liabilities. None of these estimates are critical accounting estimates for the preparation of our condensed consolidated financial statements. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, and we evaluate our estimates and assumptions on an ongoing basis. Due in part to conflicts and geopolitical tension around the world, particularly in Eastern Europe or the Middle East, or any worsening or expansion of such conflicts or tensions, and other geopolitical and macroeconomic conditions, there is ongoing uncertainty and significant disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require an update to our estimates or assumptions or a revision of the carrying value of assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates and assumptions may change in the future, however, as new events occur and additional information is obtained. Our actual results could differ from these estimates.

Current wording

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Such estimates include, but are not limited to, allowance for doubtful accounts, deferred contract acquisitions costs, the period of benefit generated from the deferred contract acquisition costs, the capitalization and estimated useful life of internal-use software, valuation of acquired intangible assets, the assessment of recoverability of intangible assets and their estimated useful lives, useful lives of property and equipment, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation and recognition of stock-based compensation awards, the assessment of uncertain tax positions, and the recognition and measurement of current and deferred income tax assets and liabilities. None of these estimates are critical accounting estimates for the preparation of our condensed consolidated financial statements. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, and we evaluate our estimates and assumptions on an ongoing basis. Due in part to conflicts and geopolitical tension around the world, particularly in Eastern Europe or the Middle East, or any worsening or expansion of such conflicts or tensions, and other geopolitical and macroeconomic conditions, there is ongoing uncertainty and significant disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require an update to our estimates or assumptions or a revision of the carrying value of assets or liabilities as of the date of issuance of this

Previous wording

Our significant accounting policies are discussed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no changes to these policies for the six months ended June 30, 2026.

Current wording

Our significant accounting policies are discussed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no changes to these policies for the nine months ended September 30, 2026.